EIA releases skewed energy subsidies report to Congress

By focusing on one years’ data, the report underestimates the long-term benefits of subsidies to renewables.Cross-posted from Climate Progress.

As House lawmakers consider spending cuts that would eviscerate energy and environmental programs, a narrowly focused report from the Energy Information Administration (EIA) is likely to add fuel to the debate over subsidies to renewable energy.

After delaying release of the study, which compares 2010 subsidies for fossil fuels and renewable resources in the electricity sector, the EIA sent the document to three members of Congress last Friday.

Although sources close to the EIA’s decision to delay the report last week said there were internal concerns about “quality assurance” and providing a “full picture” of the subsidies landscape, the agency has decided to go forward with the product anyway.

The report offers up-to-date information on yearly government spending on energy programs; however, its limited scope paints a decidedly skewed picture of the subsidy landscape for energy. The data show that government spending on energy programs has doubled since 2007, from $17.9 billion to $27.2 billion, with renewables in the electricity sector receiving 55 percent of federal support and generating 10.3 percent of electricity. But the EIA explicitly explains that taking a “snapshot” of yearly subsidies does not tell the whole story:

Focusing on a single year’s data does not capture the imbedded effects of subsidies that may have occurred over many years across all energy fuels and technologies.

For example, many of the expenditures for renewable energy under the loan guarantee program were for facilities that are still being developed and not currently generating electricity. Also, the Treasury Grant program created in place of tax credits ended up front-loading expenditures, thus leading to “much higher overall electricity subsidy estimates for renewables in FY 2010.”

This latest survey on energy subsidies is a follow-up to a 2008 report [PDF] looking at FY 2007 spending on energy. That report found that renewables had a higher per-unit subsidy than nuclear or fossil energies — with renewable technologies getting between $0.67 and $24 per megawatt-hour of electricity, nuclear getting $1.50 per megawatt-hour, and fossils getting between $0.25 and $29 per megawatt-hour. (The $29 was for refined coal — those subsidies have been eliminated and don’t show up in the 2010 figures.)

As the EIA admits in both reports, looking simply at yearly energy expenditures does not accurately show how much each sector is getting in subsidies.

By looking at just one year’s worth of spending, the numbers are skewed against capacity that was installed during that time period — and since renewables represent a large amount of the capacity being put online today, the numbers are weighted against them. A more accurate way to compare yearly subsidies for various energy sources would be to examine the amount of money spent when capacity was actually installed.

Because fossil-fueled plants need a continued supply of fuel over the lifetime of the plant, factoring in direct and indirect subsidies for mining and transportation add more to the cost per unit of energy; by comparison, renewables like wind and solar have no fuel costs.

There are also trust funds associated with black lung, leaky pipelines, and nuclear waste storage — all of which may result in energy companies “receiving an implicit subsidy,” according to the EIA. The nuclear industry also gets an implicit subsidy from the government through the Price-Anderson Act, which puts a limit on liability for a nuclear plant owner in case of disaster.

And of course, the hundreds of billions of dollars in external environmental and health costs that come from burning fossil fuels are not factored in to the subsidies for fossil-based electricity. (As the Tennessee Valley Authority cleans up its $1.2 billion coal ash spill that hurt the local economy and gave people respiratory problems, the folks in Roscoe, Texas have revived their community with one of the world’s largest wind farms — but that “value” is extraordinarily difficult to quantify within such a limited conversation around yearly government spending.)

In an interview with Scaling Green earlier this year, Chris Namovicz, an analyst at the EIA, explained that there still hasn’t been a definitive count of all these implicit and explicit subsidies:

The EIA addresses many of these limitations in the summary of the report. But because the document was requested by members of Congress with very specific limitations on the guidelines, the agency has no choice but to provide a narrow piece of work.

Sen. Lamar Alexander (R-Tenn.) requested the original 2007 report and cited the figures when railing against “Big Wind.” And organizations like the Heritage Foundation and the Heartland Institute continue to use the figures in their effort to stop government support for renewable energy.

The three Republican representatives who requested the latest report with the same guidelines — Jason Chaffetz (R-Utah), Marsha Blackburn (R-Tenn.), and Roscoe Bartlett (R-Md.) — have not said how they would use the information.

The EIA does a lot of very commendable work. And this latest piece provides a lot of good data. But the limited nature of the request from members of Congress means the agency can only go so far in its analysis. This led Doug Koplow, a government-subsidy analyst, to ask whether the EIA should do a better job of broadening a piece of research:

When such a request for a non-routine analysis of broad interest to the Congress is placed, should there be a process by which EIA or other statistical agency can vet the scope to a somewhat wider audience — at least within Congress — before embarking on the research? Such input at the early stages could result in a much more robust and useful product, but becomes increasingly difficult to integrate once research is well underway and a delivery time has been committed to.

Questions around the EIA’s de
lay of the report last week lead three organizations to issue a Freedom of Information Act request [PDF] on all communication surrounding its release. The Checks and Balances Project, Greenpeace, and Oil Change International are requesting more details on whether or not the agency was concerned about the quality of the report.